QCP Capital analysts emphasized ether's significant underperformance relative to bitcoin in August and cautioned that September might bring additional declines.
"Bitcoin ended August down 8.6%. We started the month with the 'Bank of Japan crash' and bitcoin was never able to recover above $65,000. Ethereum ETH
+1.94%
performance in August was significantly poorer, down 22.2% in August on the back of alleged selling by Jump Trading," QCP Capital analysts said.
The price declines of both bitcoin and ether in August occurred amid a significant increase in cryptocurrency market volatility. Last month's substantial price swings started on Aug. 4, when major tokens saw a sharp sell-off alongside equities triggered by the Bank of Japan’s interest rate hike and the yen’s subsequent appreciation against the dollar. This sell-off marked one of the most severe downturns for risk assets since the "Black Monday" crash of 1987. According to QCP Capital, since this deleveraging event, ether has fared worse than bitcoin, with its decline potentially exacerbated by Jump Crypto, the crypto division of Jump Trading, moving large amounts of ether to exchanges on the same day.
Also, spot ether exchange-traded funds underwhelmed in August, suggesting interest in the products seems to be dwindling. The ether-based investment products saw $5.7 million worth of net outflows last week, with trading volume dropping to just 15% of levels seen during their debut week in late July.
Historical trends show September is seasonally bearish
QCP Capital analysts added that September could see a further bearish downtrend for major cryptocurrencies.
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"Historically, September seasonality is bearish with six of the last seven Septembers in the red and with an average return of minus 4.5%, which would take us to around $55,000 if we see the same this month," the analysts said. They expect bitcoin to find support around $54,000 in the month ahead, which is the level it bounced from in July before briefly touching $70,000 at the end of that month.
Also, front-end options implied volatility suggests that derivatives market participants are placing their bets on a lackluster performance for both bitcoin and ether in the weeks ahead, with the longer-term view becoming more bullish.
"We expect the vol curve to steepen further as front-end vols drift lower in a sideways market. At the same time, more long calls are being rolled further out till March for both bitcoin and ether," QCP Capital analysts said.
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